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No one wants to be in the Citi

Written by A Forex View From Afar on Tuesday, January 15, 2008

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Recently, the Chinese Authorities have rejected an investment in Citigroup by China Development Bank. This is big image loss for Citi, until recently, the Chinese Investment Corp was seen as a piggy bank of Wall Street bankers and investors.

It seems not only Citi is in search of foreign capital, Merrill is too. Sources have reported an $925 million investment from Mizuho, the Japan-based bank. Quite a small sum, isn't it?

Going again to Citi, a planed deal for some time was suddenly rejected by the Chinese Government. This can be taken as a strange behavior of the communist gathering, to show who the is in charge. In 2007 we had one of this moments, it was March and the markets plunged like there was no tomorrow.
China Investment Corporation is still criticized from the Blackstone investment made in June 2007, which until now lead to a 30% loss, and to a bigger loss of credibility.

What traders should found strange is the rejection came one day earlier then Citigroup earning. Maybe Citigrup CEO wants to show the markets there are reasons to buy its shares, despite the fact tomorrow they will confirm financial loses. They could say “Yes, we had billions in loses, but we have a bright future, China Investment Corp had invested in us”.
It seems they will only say the first part...

Merrill is expected to show a 15 billion loss, so a 925$ millions investment is close to nothing. This investment made by Mizuho looks more like a watchful one, and the rejected bill by the Chinese Government make traders think if financial markets had really found a bottom yet?

WSJ: China Balks at Pumping Fresh Capital to Citigroup
Reuters: Mizuho in talks to invest in Merrill

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